Stocks climb on bargain hunting

Wall Street reversed a three-day slide today as investors returned to the market in search of bargains, shrugging off high-tech profit warnings and an analyst downgrade of Internet stocks.

The advance had little conviction behind it, however, as volume remained light and the major indexes lost more than half of their earlier gains.

Investors were generally making few big moves as they awaited second-quarter earnings, including results from Alcoa and Yahoo! Inc. due after the close.

But analysts said investors were making some bets on hopes for strong second-quarter results overall. A slight drop in oil prices also cheered the market.

“This is a little bit of a relief rally, certainly some bargain hunting,” said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co.

“This is a very nervous market, and it needs to hear better news from corporate America, telling it that the earnings growth is still in place. We’re not hearing that from the technology sector.”

The Dow Jones industrial average rose 20.95, or 0.2%, to 10,240.29.

Broader stock indicators were narrowly higher. The Standard & Poor’s 500 index gained 2.12, or 0.2%, to 1,118.33, and the tech-dominated Nasdaq composite index was up 2.65, or 0.1%, at 1,966.08.

All three major indexes had been down for the three previous sessions as investors worried that the economy was slowing.

But despite the current negativity and warnings, some analysts believed a strong second quarter earnings season was still a given, in part due to the lower comparisons from a year ago, when companies were just starting to see their bottom lines recover from recession.

“I think the second quarter will see some blow-out type numbers,” said Kevin Caron, market strategist at Ryan, Beck & Co.

“I think that’ll moderate somewhat in the second half of the year and into 2005, but the economy and earnings as a whole remains healthy.”

Corporate software makers PeopleSoft Inc. and JDA Software Group Inc. both warned that their quarterly earnings would fall below analyst expectations.

PeopleSoft rose 31 cents to 17.13, while JDA Software skidded 83 cents to 11.02.

Even software giant Microsoft Corp. isn’t immune to the crunch, though its share price held up well.

Microsoft gained 8 cents to 28.10 after chief executive Steve Ballmer, in a memo to employees, said the company would trim one billion dollars in expenses by reducing prescription drug benefits and stock discounts for its workers.

Prudential Securities singled out another sector within technology, downgrading the entire Internet sector to ”neutral” from “favourable,” citing the possibility of a summer slowdown.

Prudential singled out eBay Inc., cutting its rating on the online auctioneer to “neutral weight” from “overweight.” Ebay lost 2.97 to 86.87.

In other news, consulting firm Accenture Ltd. Matched Wall Street estimates with a 59% surge in quarterly profits. Accenture gained a penny to 27.25.

Nasdaq market maker Knight Trading Group Inc. was down 49 cents at 8.74 after it said it would take a 79 million charge in the second quarter to settle a federal investigation into its trading practices.

The company’s second-quarter earnings will also come in below estimates due to stock volatility and low trading volume.

Advancing issues outnumbered decliners by more than 4 to 3 on the New York Stock Exchange, where volume was light.

The Russell 2000 index of smaller companies was down 0.46, or 0.1 percent, at 571.95.